Lawyer's ERISA Claim Against Former Firm Tossed

Lawyer's ERISA Claim Against Former Firm Tossed

A lawyer’s suit against The Webb Law Firm in Pittsburgh alleging that he was misclassified as an independent contractor while he worked there was tossed by a federal judge.

Darrell Eugene Williams had worked at The Webb Law Firm as a patent attorney since 2001, at some points as an associate and at others under an independent contractor agreement, which U.S. District Chief Judge Joy Flowers Conti of the Western District of Pennsylvania referred to in her opinion as an ICA.

The judge agreed with the law firm that Williams had missed his window—the Employee Retirement Income Security Act’s three-year statute of limitations—to bring the suit, which was filed in 2012.

“Williams knew about the material elements of the Webb firm’s alleged breach of fiduciary duty, at the latest, in May 2007,” Conti said. “Williams contends that he acquired actual knowledge of Webb’s breach when he filed for unemployment benefits on Nov. 15, 2009, or in May 2010, when he received retroactive unemployment benefits payments from the PDLI,” she said, referring to the Pennsylvania Department of Labor & Industry. “The PDLI determination would have confirmed Williams’ belief that he was harmed by the Webb firm; however, like the plaintiffs in Ziegler, Williams had actual knowledge of his injury before he filed with the PDLI.”

Ziegler v. Connecticut General Life Insurance was decided by the U.S. Court of Appeals for the Ninth Circuit in 1990 and was one of two opinions from that court relied upon by the Third Circuit in 1992 in Gluck v. Unisys. Conti described that opinion as “the seminal Third Circuit Court of Appeals’ decision for the application of ERISA’s three-year statute of limitation.”

The judge explained that the three-year limit for ERISA claims is “cautiously applied,” saying that in order for it “to apply to a breach of a fiduciary claim ‘two temporal determinations must … be made: the date of the last action which formed a part of the breach and the date of the plaintiff’s actual knowledge of the breach.’” She quoted from Gluck.

“Actual knowledge requires that the defendant show that: (1) plaintiff actually knew about the events that constituted the breach of the fiduciary duty; and (2) those events supported a claim for breach of a fiduciary duty pursuant to ERISA,” Conti said, citing to the Third Circuit’s 1992 opinion in International Union of Electronic Electric Salaried Machine and Furniture Workers v. Murata Erie North America.

The burden fell on the Webb firm to show that Williams had actual knowledge of the alleged breach at least three years before he filed his complaint. The firm persuaded the judge.

“The Webb firm’s main contention is that Williams’ repudiation of his benefits on Jan. 22, 2001, the date of the first ICA, or Nov. 30, 2005, the date of the second ICA, gave Williams actual knowledge about the events that constituted the breach and began the running of the three-year limitations period,” Conti said.

Williams began at the Webb firm under an ICA in 2001, and six months later became an associate at the firm, according to the opinion. As an associate, he got a salary and benefits that included health insurance, a 401(k), profit sharing, life insurance, long-term disability and travel insurance, among other things.

In 2005, Williams approached the president of the board of directors for the firm at the time, Russell Orkin, and asked to work as an independent contractor again. He began work at the start of 2006 under the second ICA.

In 2007, he approached Orkin again to discuss becoming an associate so that he could reinstate the health insurance that was part of the associate’s benefits package. The firm agreed to amend his ICA to include a certain portion of his medical coverage depending on the number of hours he billed each month. Conti’s opinion referred to that version as the third ICA.

Williams worked for the firm under that arrangement until 2009, when he stopped working for the Webb firm.

Referring to Williams’ 2007 conversation with Orkin over health insurance, Conti said, “It is clear, as indicated by Williams, that in May 2007, he was aware that he was not receiving benefits from the Webb firm.”

And, since Williams had worked at the firm as an associate for years, she said, “His unique position allowed him to understand that he was performing the same tasks under the ICAs for the Webb firm that he performed as an associate attorney without receiving employment benefits.”

So, by 2007, Williams had all of the elements to bring an ERISA action.

“Unlike many of the decisions in which the Third Circuit Court of Appeals has found the plaintiffs lacked an understanding that they possessed an ERISA claim, Williams knew of his harm, i.e., that he was performing the same tasks under the ICAs for the Webb firm that he performed as an associate attorney without receiving employment benefits, by May 2007 at the latest,” Conti said.

But, he didn’t bring a suit until 2012, so it is barred by the statute of limitations, she ruled.

Williams, who is representing himself, plans to appeal to the Third Circuit, he said.

The Webb Law Firm declined to comment on the case, according to its administrator, Michael Somerhalder. It was represented by Bethany Swaton Wagner and A. Patricia Diulus-Myers of Jackson Lewis in Pittsburgh.

Saranac Hale Spencer can be contacted at 215-557-2449 or sspencer@alm.com. Follow her on Twitter @SSpencerTLI.

(Copies of the 23-page opinion in Williams v. The Webb Law Firm, PICS No. 14-1198, are available from The Legal Intelligencer. Please call the Pennsylvania Instant Case Service at 800-276-PICS to order or for information.)  •

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